Air Canada

Q2 2026 adjusted EBITDA was $719 million, at the upper end of guidance, with an adjusted EBITDA margin of 11.5%. Operating revenue reached a record $6.3 billion, up 11% year over year, and passenger revenue was $5.6 billion, also up 11%. PRASM increased 11%, yield rose 7%, and system-wide load factor was 87.5%. Reported operating expenses were 24% higher year over year, including $388 million of charges excluded from adjusted EBITDA; excluding those charges, operating expenses were up 17%. Average Q2 fuel price was CAD 1.33 per liter versus a CAD 1.28 assumption, and the company said it recovered about 50% of the incremental fuel expense in the quarter. For full-year 2026, management now expects ASM growth of 2.25% to 3.25%, adjusted CASM up 5% to 6%, adjusted EBITDA of $2.9 billion to $3.2 billion, and free cash flow of $200 million to $500 million. It also expects Q3 fuel at about CAD 1.38 per liter and Q4 at about CAD 1.29 per liter, with Q4 fuel recovery above 100% at current market prices.

Michael Rousseau framed the quarter as evidence that Air Canada’s diversified model can absorb shocks while still producing strong earnings and record revenue. He emphasized resilient demand, premium and loyal customers, Cargo, Vacations and Aeroplan as key supports, and said the company remains committed to New Frontiers, fleet modernization and new international routes. He was also upbeat on the Aeroplan transaction, saying it monetizes value while preserving full control of the program and strengthening the balance sheet.

John Di Bert focused on how pricing, capacity discipline and commercial execution offset a large fuel shock. He said Q2 adjusted EBITDA was $719 million, operating cash flow was $651 million, free cash flow was $174 million, and liquidity ended at $8.9 billion; net leverage was 1.7x, and the company has already repurchased 14.5 million shares year to date. He also detailed the Aeroplan transaction’s capital uses: paying the USD 1.2 billion August 2026 maturity, expecting a 0.5-turn improvement in gross and net debt leverage, and initiating a substantial issuer bid to buy back up to CAD 800 million of stock.

Analysts focused on back-half CASM, Q4 TRASM, Aeroplan economics, the credit-rating impact of the transaction, and the path to investment grade. Management said second-half adjusted CASM should be about 4% to 5%, with pressure from lower capacity, sales commissions and a weaker Canadian dollar, but expects cost pressure to ease in 2027 as more aircraft arrive and capacity mix improves. On revenue, Mark Galardo said Q4 TRASM should be higher year over year than Q2 and that fuel recovery should be at or just above 100% in Q4. On Aeroplan, management said the 25% investor stake implies roughly a proportional cash distribution, there are no specific performance hurdles for the 6.5% IRR structure, and the agencies have viewed the deal positively, with one outlook already improved.